Def 14a
Schedule 14A
(Rule 14a-101)
Information Required In Proxy Statement
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
o Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Under
Rule 14a-12
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Triad Guaranty Inc.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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TRIAD GUARANTY
INC.
101 South Stratford Road
Winston-Salem, North Carolina 27104
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 27, 2009
To the Stockholders of TRIAD GUARANTY INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Triad Guaranty Inc. (the Company) will be held at
the offices of the Company, 101 South Stratford Road,
Winston-Salem, North Carolina, on Thursday, August 27,
2009, at 2:00 p.m. Eastern Daylight Time, for the purpose
of considering and acting upon the following matters:
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1.
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To elect the five (5) directors named in the accompanying
proxy statement to serve until the next annual meeting of
stockholders and until their successors are elected and
qualified or until their earlier resignation or removal;
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2.
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To ratify the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for
the year ending December 31, 2009; and
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3.
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To consider and act upon such other business as may properly
come before the meeting or any adjournments thereof.
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Stockholders of record as of the close of business on
July 10, 2009 shall be entitled to notice of and to vote at
the meeting. The transfer books will not be closed. For ten
(10) days prior to the meeting, a list of stockholders
entitled to vote at the meeting will be open to the examination
of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, at the offices of the Company,
101 South Stratford Road, Winston-Salem, North Carolina 27104.
Stockholders who do not expect to attend the meeting in person
are urged to execute and return the accompanying proxy in the
envelope enclosed. You may also vote your shares on the Internet
or by using a toll-free telephone number (see the proxy card for
complete instructions).
By order of the Board of Directors
Earl F. Wall
Secretary
Winston-Salem, North Carolina
July 24, 2009
TABLE OF CONTENTS
PROXY
STATEMENT
TRIAD GUARANTY INC.
ANNUAL MEETING OF
STOCKHOLDERS
August 27, 2009
Important Notice Regarding the Availability of Proxy
Materials for the Stockholder
Meeting to
be Held on August 27, 2009:
The Notice of 2009 Annual Meeting of Stockholders, proxy
statement, form of proxy and
our
2008 Annual Report are available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=106599&p=irol-proxy
GENERAL
INFORMATION
This proxy statement is being furnished to the stockholders of
Triad Guaranty Inc., a Delaware corporation (the
Company, we, us or
our), 101 South Stratford Road, Winston-Salem, North
Carolina 27104, in connection with the solicitation of proxies
by its Board of Directors for use at the annual meeting of
stockholders to be held at the offices of the Company on
Thursday, August 27, 2009, at 2:00 p.m. Eastern
Daylight Time, and at any adjournments thereof. The approximate
date on which this proxy statement and the accompanying proxy
are first being sent to stockholders is July 24, 2009. If
you need directions to the location for our 2009 Annual Meeting
of Stockholders, please contact Ms. Bobbi Wright at
336.723.1282, extension 1109.
The accompanying proxy is for use at the meeting if a
stockholder either will be unable to attend in person or will
attend but wishes to vote by proxy. Registered
holders who have shares registered in the owners
name through the Companys transfer agent may vote by
(i) returning a completed proxy card in the enclosed
postage-paid envelope, (ii) accessing the Internet website
identified on the proxy card and following the steps outlined on
the secured website, or (iii) calling the toll free
telephone number identified on the proxy card within the United
States, Canada and Puerto Rico. For shares held in street
name, that is, shares held in the name of a brokerage
firm, bank or other nominee, a voting instruction form should be
received from that institution by mail in lieu of a proxy card.
Street name holders of our shares may vote by
(i) returning a completed voting instruction form in the
enclosed postage-paid envelope, (ii) accessing the Internet
website if one is identified on the voting instruction form, or
(iii) calling the telephone number if one is identified on
the voting instruction form. The availability of telephone and
Internet voting for street name holders will depend
on the voting processes of the respective broker, bank or other
nominee holder of record. Therefore, we recommend that you
follow the voting instructions in the materials that you
personally receive.
Proxies submitted by the Internet or telephone must be received
by 12:00 a.m., Eastern Daylight Time, on August 27,
2009. The Internet and telephone voting procedures are designed
to authenticate the stockholders identity and to allow
stockholders to vote their shares and confirm that their
instructions have been properly recorded.
The proxy is revocable at any time before it is voted by a
subsequently dated proxy, which may be provided by
(i) written notification to the persons named therein as
proxies that is mailed or delivered to the Company at the above
address, (ii) if available, subsequently voting on the
Internet or telephone, or (iii) physically attending the
meeting and voting in person. All shares represented by
effective proxies will be voted at the meeting and at any
adjournments thereof.
Proxies properly submitted by mail, the Internet or the
telephone will be voted by the individuals named on the proxy
card in the manner you indicate. If no specification is made,
the proxy will be voted by the persons named therein as proxies
FOR the election as directors of the nominees named below (or
substitutes thereof, if any nominees are unable or refuse to
serve), FOR ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm
for 2009, and in their discretion upon such matters not
presently known or determined which may properly come before the
meeting. With respect to the election of directors, a plurality
of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election are
required for the election of a director. Ratification of the
appointment of Ernst & Young LLP requires a majority
of the shares present in person or represented by proxy at the
meeting and entitled to vote on the ratification to vote in
favor of the ratification.
We have one class of stock outstanding, common stock, par value
$0.01 per share. On July 10, 2009, 15,215,378 shares
of our common stock were outstanding and entitled to one vote
each on all matters to be considered at the meeting.
Stockholders of record as of the close of business on
July 10, 2009 are entitled to notice of and to vote at the
meeting. There are no cumulative voting rights with respect to
the election of directors.
The holders of a majority of our common stock issued and
outstanding on the record date, July 10, 2009, present in
person or represented by proxy at the annual meeting, will
constitute a quorum for the meeting. Inspector(s) of election
will be appointed to tabulate the number of shares of common
stock represented at the meeting in person or by proxy to
determine whether or not a quorum is present and to count all
votes cast at the meeting. Brokers that are members of the New
York Stock Exchange, Inc. (the NYSE) and who hold
shares of the Companys common stock in street name for
beneficial owners have authority to vote on certain items when
they have not received instructions from beneficial owners.
Under the rules of the NYSE, the proposals to elect directors
and ratify the appointment of the independent registered public
accounting firm are considered discretionary items.
This means that brokers may vote in their discretion on these
matters on behalf of beneficial owners who have not furnished
voting instructions. In contrast, certain items are considered
non-discretionary, and a broker non-vote
occurs when brokers do not receive voting instructions from
beneficial owners with respect to such items. None of the
proposals presented in this proxy statement are
non-discretionary items. Therefore, brokers that
have not received voting instructions from beneficial owners
with respect to the proposals contained in this proxy statement
may vote in their discretion on these matters on behalf of such
beneficial owners.
The inspector(s) of election will treat abstentions and broker
non-votes, if any, as shares that are present and entitled to
vote for purposes of determining whether there is a quorum for
the meeting. With respect to the tabulation of votes cast on any
of the proposals presented to the stockholders at the meeting,
abstentions will be considered as present and entitled to vote
with respect to that specific proposal, and, therefore, will
have the effect of a vote against the proposal. Broker non-votes
are considered present and entitled to vote and, if applicable,
would have the effect of a vote against the proposal in
question. Shares for which authority to vote for a particular
nominee for election as a director is withheld will not be
counted as votes for the election of that nominee.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table shows, with respect to each person who is
known to be the beneficial owner of more than 5% of our common
stock: (i) the total number of shares of common stock
beneficially owned as of July 10, 2009, unless otherwise
indicated; and (ii) the percentage of the common stock so
owned as of that date:
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Name and Address of
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Amount and Nature of
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Percent of
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Beneficial Owner
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Beneficial Ownership(1)
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Common Stock
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Collateral Holdings, Ltd. and affiliates(2)(3)
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2,572,550
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16.9
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%
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Third Avenue Management LLC(4)
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1,300,000
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8.6
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%
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2
The following table shows with respect to each director and
nominee for director, each executive officer identified in the
Summary Compensation Table included in this proxy statement, and
all directors and executive officers as a group: (i) the
total number of shares of common stock beneficially owned as of
July 10, 2009; and (ii) the percentage of the common
stock so owned as of that date. Except as indicated in the
footnotes to this table and under applicable community property
laws, each stockholder named in the table has sole voting and
dispositive power with respect to the shares set forth opposite
the stockholders name. Unless otherwise indicated, the
address for each of our directors and executive officers is
c/o Triad
Guaranty Inc., 101 South Stratford Road, Winston-Salem, North
Carolina 27104:
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Amount and Nature of
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Percent of
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Name of Beneficial Owner
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Beneficial Ownership(1)
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Common Stock
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Robert T. David
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39,556
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(6)
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*
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H. Lee Durham, Jr.
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17,419
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*
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Stephen J. Haferman
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19,799
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(6)
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*
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Deane W. Hall
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9,375
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(6)
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*
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Kenneth W. Jones
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28,918
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(6)
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Gregory J. McKenzie
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38,300
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*
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William T. Ratliff, III(5)
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3,240,903
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(6)(7)
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21.3
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%
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Mark K. Tonnesen
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244,654
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(6)
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1.6
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%
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Bruce Van Fleet
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27,000
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Earl F. Wall
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129,175
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(6)
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David W. Whitehurst
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55,177
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(6)
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All directors and executive officers as a group (14 persons)
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3,907,346
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25.7
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%
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Less than one percent (1%). |
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(1) |
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Calculated pursuant to
Rule 13d-3(d)
under the Securities Exchange Act of 1934. Unless otherwise
stated below, each such person has sole voting and investment
power with respect to all such shares. In accordance with
Rule 13d-3(d),
shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within sixty
(60) days of July 10, 2009 are deemed outstanding for
the purpose of calculating the number and percentage owned by
such person, but are not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed. |
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Collat, Inc. is the general partner of Collateral Holdings, Ltd.
and as such may be deemed to be the beneficial owner of the
shares of common stock owned by Collateral Holdings, Ltd.
Mr. William T. Ratliff, III is the president and a
director of Collat, Inc. and beneficially owns 50.2% of the
outstanding voting capital stock of Collat, Inc. Accordingly,
Mr. Ratliff, III may be deemed to be the beneficial
owner of the shares of common stock owned by Collateral
Holdings, Ltd. The business address of
Mr. Ratliff, III, Collateral Holdings, Ltd. and
Collat, Inc. is 1900 Crestwood Boulevard, Birmingham, Alabama
35210. Mr. Ratliff, III is the son of Mr. William
T. Ratliff, Jr. |
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Based in part on a Schedule 13G/A jointly filed by
Collateral Holdings, Ltd., Collat, Inc., Mr. Ratliff, Jr.
and Mr. Ratliff, III with the Securities and Exchange
Commission on February 13, 2009, reporting shared power of
Collateral Holdings, Ltd. to vote or direct the vote of and
dispose or direct the disposition of 2,572,550 shares;
shared power of Collat, Inc. to vote or direct the vote of and
dispose or direct the disposition of 2,572,550 shares; sole
power of Mr. Ratliff, Jr. to vote or direct the vote
of and dispose or direct the disposition of 571,037 shares
and shared power of Mr. Ratliff, Jr. to vote or direct the
vote of and dispose or direct the disposition of
2,572,550 shares; and sole power of
Mr. Ratliff, III to vote or direct the vote of and
dispose or direct the disposition of 282,457 shares and
shared power of Mr. Ratliff, III to vote or direct the
vote of and dispose or direct the disposition of
2,819,068 shares. The aggregate amount of shares
beneficially owned by Mr. Ratliff, III includes
2,572,550 shares held of record by Collateral Holdings,
Ltd., 2,617 shares of record held by his wife,
7,077 shares held of record in trusts for his minor
children, 46,460 shares which he could acquire through the
exercise of stock options, 74,555 shares through
RaS I, Ltd, a family limited partnership and
246,518 shares as one of five trustees for a
Grandchildrens Trust. |
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Based on a Schedule 13G filed by Third Avenue Management
LLC (TAM) with the Securities and Exchange
Commission on February 13, 2009. TAM has sole voting and
dispositive power with respect to these shares. According to its
Schedule 13G, Third Avenue Real Estate Opportunities Fund,
L.P., a private fund for which TAM |
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acts as investment advisor, has the right to receive dividends
from, and the proceeds from the sale of, the common stock
reported by TAM. The business address of Third Avenue Management
LLC is 622 Third Avenue, 32nd Floor, New York, NY 10017. |
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Mr. Ratliff, III is president and a director of
Collat, Inc., the general partner of Collateral Holdings, Ltd.,
and beneficially owns 50.2% of the outstanding voting capital
stock of Collat, Inc. Accordingly, Mr. Ratliff, III
may be deemed to be the beneficial owner of the shares of common
stock owned by Collateral Holdings, Ltd. The business address of
Mr. Ratliff, III is 1900 Crestwood Boulevard,
Birmingham, Alabama
35210-2034.
Mr. Ratliff, III is the son of Mr. Ratliff, Jr.
No other director or executive officer of the Company
beneficially owns any partnership interests in Collateral
Holdings, Ltd. |
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(6) |
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Includes shares of common stock which could be acquired through
the exercise of stock options as follows: Mr. David,
4,080 shares; Mr. Haferman, 1,933 shares:
Mr. Hall, 0 shares; Mr. Jones, 1,800 shares;
Mr. Ratliff, III, 46,460 shares;
Mr. Tonnesen, 143,225 shares; Mr. Wall,
4,447 shares; Mr. Whitehurst, 20,360 shares; and
all directors and executive officers as a group,
233,879 shares. |
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(7) |
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Includes 2,617 shares owned by
Mr. Ratliff, IIIs wife; 7,077 shares held
of record in trusts for his minor children; 74,555 shares
held through RaS I, Ltd., a family limited partnership; and
246,518 shares held by Mr. Ratliff, III as one of
five trustees for the Grandchildrens Trust U/A,
December 4, 1990. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys executive officers, directors and
persons who own more than 10% of the Companys common stock
to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. These persons are required
to provide the Company with copies of all Section 16(a)
forms that they file. Based solely on the Companys review
of these forms and written representations from the executive
officers and directors, the Company believes that all
Section 16(a) filing requirements were met during calendar
year 2008, except that William T. Ratliff, III did not file
a Form 4 to report the sale of certain shares of our common
stock by a trust for his minor children on December 11,
2008. A Form 4 disclosing this transaction was filed with
the SEC on May 21, 2009.
ELECTION
OF DIRECTORS
Nominees
and Directors
At the meeting, five (5) directors are to be elected to
hold office until the next annual meeting of stockholders and
until their successors are duly elected and qualified. All of
the nominees are presently directors of the Company. Each
director who is standing for re-election was elected to serve by
the stockholders at the last regularly scheduled annual meeting
except for Mr. Hall, who was recommended to serve on the
Board of Directors by one of our former non-employee directors
and was, upon recommendation of the Corporate Governance and
Nominating Committee, elected to serve as a director by the
Board of Directors in January 2009.
The affirmative vote of the holders of a plurality of the shares
of common stock represented in person or by proxy at the annual
meeting of stockholders and entitled to vote on the election is
required to elect directors. It is intended that, in the absence
of contrary specifications, votes will be cast pursuant to the
enclosed proxies for the election of such nominees. Should any
of the nominees become unable or unwilling to serve, if elected,
it is intended, in the absence of contrary specifications, that
the proxies will be voted for the balance of those named and for
a substitute nominee or nominees. However, we now know of no
reason to anticipate such an occurrence. All of the nominees
have consented to be named as nominees and to serve as directors
if elected.
The following persons are nominees for election as directors of
the Company:
Robert T.
David Age
71 Director since 1993
Since 2000, Mr. David has served as President and Chief
Executive Officer of Integrated Photonics, Inc., a manufacturer
of fiber optic components and materials.
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H. Lee
Durham, Jr. Age
61 Director since 2006
Mr. Durham served PricewaterhouseCoopers in a number of
senior management positions from 1990 until his retirement in
2002. From 1980 to 1990 he was with Durham, Martin,
Jenkins & Co., a firm he founded and grew until it was
merged into Coopers & Lybrand. Since 2003,
Mr. Durham has served on the board of First Citizens
BancShares, Inc. and currently serves as Chair of its Audit
Committee.
Deane W.
Hall Age
59 Director since 2009
Mr. Hall retired from JP Morgan Chase in April 2006 after
serving in numerous senior management roles over his
17 years with their mortgage subsidiary, Chase Home
Finance. He was a member of Chase Home Finance Board of
Directors during that period. In addition, Mr. Hall served
on the Board of Directors of Mortgage Electronic Registration
System (MERS) from July 1998 to June 2004. His prior
experience also includes five years with Fannie Mae.
Mr. Hall currently serves as a member of the Board of
Directors of CSI, Inc., a nationwide staffing company.
William T.
Ratliff, III Age
56 Director since 1993
Mr. Ratliff, III has been the Chairman of the Board of
the Company since 1993 and served as the Companys Chief
Executive Officer and President from July 2008 to October 2008,
and continued to serve as an executive officer of the Company
from October 2008 until March 2009. Mr. Ratliff, III
was Chairman of the Board of Triad from 1989 to 2005 and
President of Collateral Investment Corp. (CIC), an
insurance holding company, from 1990 to 2005.
Mr. Ratliff, III has served as President of Collat,
Inc. since 1995 and as a director since 1987. Collat, Inc. is
the general partner of Collateral Holdings, Ltd., a closely-held
investment partnership. Mr. Ratliff, III has been
Chairman of the Board of Directors of New South Federal Savings
Bank (New South) since 1986 and President and a
director of New South Bancshares, Inc., New Souths parent
company, since 1994.
Effective May 15, 2009, New South consented to a cease and
desist order (the Order) issued by the Office of
Thrift Supervision (OTS). The Order, among other
things, requires New South to conform to various federal
regulatory lending standards and guidelines, submit certain
capital and business plans to OTS and meet certain capital
requirements by specified deadlines. The Order also contains
various restrictions on New Souths ability to enter into
new contracts with third parties, make payments to its directors
or senior executive officers, including Mr. Ratliff, and
engage in certain lending transactions.
David W.
Whitehurst Age
59 Director since 1993
Mr. Whitehurst is the owner of DW Investments, LLC, a real
estate and investment holding company, and DW Cleaners LLC d/b/a
Champion Cleaners, a dry cleaning business in Birmingham,
Alabama. He was Executive Vice President and Chief Operating
Officer of CIC from 1995 to 2002. He was a director of New South
from 1989 to 2001. Mr. Whitehurst is a certified public
accountant (retired).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES LISTED ABOVE.
CORPORATE
GOVERNANCE
The Board
of Directors
The business and affairs of the Company are managed under the
direction of the Board of Directors. The Board of Directors has
determined that each of Messrs. David, Durham, Hall and
Whitehurst is an independent director, as that term
is defined under the listing standards of The NASDAQ Stock
Market LLC (Nasdaq). Mr. Swanson, who resigned
from the Board in October 2008, and Messrs. Williamson and
Austin, who did not stand for re-election in 2008, also were
previously determined to be independent directors under the
Nasdaq listing standards. The Board performed a review to
determine the independence of its members and made a subjective
determination as to each of these independent directors that no
transactions, relationships or arrangements exist that, in the
opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director of Triad Guaranty Inc. In making these
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determinations, the Board reviewed the information provided by
the directors and the Company with regard to each
directors business and personal activities as they may
relate to the Company and its management.
Mr. Austin served as the Boards Lead Independent
Director from November 2007 until the end of his term in
September 2008. Mr. Durham currently serves as the
Companys Lead Independent Director. The Lead Independent
Director is responsible for leading the executive sessions of
independent directors, advising on Board meeting schedules and
agendas and for performing such other duties as are requested by
the Board. The general authority and responsibilities of the
Lead Independent Director are established by the Board. The Lead
Independent Director serves a one-year term in such capacity, or
until his or her resignation as Lead Independent Director or the
election by the independent directors of a successor Lead
Independent Director.
During 2008, the Board of Directors met forty (40) times.
No director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the committees on which
he served.
Corporate
Governance Guidelines
The Board has implemented written Corporate Governance
Guidelines designed to assist the Board in fulfilling its duties
and responsibilities. The Corporate Governance Guidelines
address a number of matters, including Board functions and
membership criteria, categorical standards for determining
director independence, Board and committee meetings, term and
age limits, executive sessions, director compensation, director
orientation and education, management succession planning, and
other corporate governance items. These Corporate Governance
Guidelines (including the categorical standards for determining
director independence, which are set forth as
Annex A thereto) are available at the Companys
website at:
http://www.triadguaranty.com/pdf/CorporateGovernanceGuidelines.pdf
.
Board
Committees
The Board of Directors currently has three (3) active
standing committees the Audit Committee, the
Corporate Governance and Nominating Committee, and the
Compensation Committee. Until September 2008, the Board also had
two (2) additional committees: the Finance and Investment
Committee and the Credit Risk Committee. In addition, in
response to the extraordinary challenges presented by the real
estate, credit and mortgage markets during 2008, the Board
established two (2) ad hoc committees: the Special Finance
Committee and the Special Transition Committee.
Audit
Committee
The Audit Committee, which is a separately-designated standing
Audit Committee established in accordance with
section 3(a)(58)(A) of the Securities Exchange Act of 1934,
appoints the Companys independent registered public
accounting firm. The Audit Committee also reviews the scope of
the annual audit, the annual and quarterly financial statements
of the Company and the auditors report thereon and the
auditors comments relative to the adequacy of the
Companys system of internal controls and accounting
systems. In addition, the Audit Committee oversees the
Companys internal audit function. The Audit Committee acts
pursuant to the Audit Committee Charter, a copy of which is
available on the Companys website at:
http://www.triadguaranty.com/investors/committees.php.
The Audit Committee reviews and reassesses the adequacy of the
Audit Committee Charter on an annual basis. The Audit Committee,
which is currently composed of Messrs. Whitehurst
(Chairman), Durham and Hall, met twelve (12) times in 2008.
During 2008, Messrs. Austin, David and Williamson also
served on the Audit Committee.
The Board of Directors has determined that each of
Mr. Whitehurst and Mr. Durham is an audit
committee financial expert as defined in the
Sarbanes-Oxley Act of 2002 and the applicable rules and
regulations of the Securities and Exchange Commission. The Board
has also determined that all of the members of the Audit
Committee: (i) are independent under
Rule 10A-3(b)(1)
under the Securities Exchange Act of 1934, (ii) have not
participated in the preparation of the financial statements of
the Company or any current subsidiary during the past three
(3) years, and (iii) are able to read and understand
fundamental financial statements, including a balance sheet,
income statement and cash flow statement. In addition, the Board
has determined that each member of the Audit Committee is
independent under the applicable Nasdaq listing standards.
6
Corporate
Governance and Nominating Committee
The Corporate Governance and Nominating Committee (hereinafter
the Nominating Committee) makes recommendations to
the Board regarding corporate governance matters and oversees
director nominations. Among other corporate governance
responsibilities, the Nominating Committee (i) reviews and
assesses the adequacy of the Companys Corporate Governance
Guidelines, (ii) leads the Board in its periodic evaluation
of the Board and its Committees, (iii) administers any
education programs deemed appropriate for new and existing
directors, and (iv) establishes and conducts orientation
programs for new directors. In carrying out its director
nomination responsibilities, the Nominating Committees
role is to identify and recommend the slate of director nominees
for election to the Companys Board of Directors, identify
and recommend candidates to fill vacancies occurring between
annual meetings of stockholders, and identify and recommend
Board members for service on committees of the Board. The
Nominating Committee acts pursuant to the Nominating Committee
Charter, a copy of which is available on the Companys
website at:
http://www.triadguaranty.com/investors/committees.php.
The Nominating Committee reviews and reassesses the adequacy of
the Nominating Committee Charter on an annual basis. The
Nominating Committee is composed of Messrs. Durham
(Chairman), Whitehurst, and David, and Messrs. Austin and
Swanson also served as members of this committee during 2008.
Each member of the Nominating Committee is independent under the
Nasdaq listing standards. The Nominating Committee met five
(5) times in 2008.
One of the principal functions of the Nominating Committee is
the oversight of the process for nominating candidates to stand
for election to the Board, as described below:
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Operation of the Nominating
Committee. Nominations for director submitted to
the Nominating Committee by stockholders, other directors or
management are evaluated according to the nominees
knowledge, experience and background. While the Nominating
Committee does not have any specific minimum qualifications for
director candidates, the Nominating Committee may take into
consideration such factors and criteria as it deems appropriate
and as set forth in the Companys Corporate Governance
Guidelines when evaluating a candidate, including his or her
judgment, skill, integrity, diversity and business or other
experience.
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The process for identifying and evaluating
candidates. The Nominating Committee is responsible for
identifying and evaluating candidates for Board membership and
selecting or recommending to the Board nominees to stand for
election. Candidates may come to the attention of the Nominating
Committee through current Board members, professional search
firms, stockholders or other persons. The Nominating Committee
Charter provides that the Nominating Committee will consider
candidates recommended by stockholders or members of the Board
or by management. The Nominating Committee evaluates all
candidates selected for consideration, including incumbent
directors, based on the same criteria as described above. All
candidates who, after evaluation, are then recommended by the
Nominating Committee and approved by the Board, are included in
the Companys recommended slate of director nominees in its
proxy statement.
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General Nomination Right of All
Stockholders. The Companys Certificate of
Incorporation and its Corporate Governance Guidelines establish
procedures, including advance notice procedures, with regard to
the nomination, other than by or at the direction of the Board
of Directors, of candidates for election as directors. Director
nominations by stockholders must be in writing addressed to the
Secretary of the Company at the Companys principal
executive offices. Such notice must be delivered or mailed and
received by the Secretary at least 60 days and not more
than 90 days prior to the date of the meeting, except that
if public disclosure of the date of the meeting is given less
than 70 days prior to the meeting, notice by the
stockholder will be considered timely if received by the
Secretary by the close of business on the 10th day after
public disclosure of the date of the meeting. Such notice must
set forth all information with respect to each such nominee as
required by the federal proxy rules, our Certificate of
Incorporation and our Corporate Governance Guidelines. Such
notice must, among other things, be accompanied by a signed
statement of such nominee consenting to be a nominee and a
director, if elected. For the 2010 Annual Meeting of
Stockholders, in order to be considered timely, notice of a
director nomination by a stockholder must be received no earlier
than February 19, 2010 and no later than March 21,
2010, and must comply with the rules and procedures set forth
above.
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7
Compensation
Committee
The Compensation Committee evaluates and approves
managements recommendations and establishes salaries and
other compensation for the Companys executive officers,
including bonuses, equity grants and other incentive programs.
The Compensation Committee also administers the Companys
2006 Long Term Stock Incentive Plan and the Companys 2007
Key Executive Incentive Compensation Plan. The Compensation
Committee, which is currently composed of Messrs. David
(Chairman), Whitehurst and Durham, met thirteen (13) times
in 2008. Messrs. Austin and Swanson also served as members
of this committee during 2008. Each member of the Compensation
Committee is independent under the Nasdaq listing standards.
The authority and responsibilities of the Compensation Committee
are set forth in its charter available at the Companys
website at:
http://www.triadguaranty.com/investors/committees.php.
Although the Compensation Committee may delegate authority to
one or more members of the Committee as deemed necessary to
fulfill its responsibilities, no such authority was delegated in
2008. The Compensation Committee reviews and reassesses the
adequacy of the Compensation Committee Charter on an annual
basis. Among other items, the Compensation Committee is charged
with:
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Reviewing the Companys overall compensation philosophy and
program;
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Reviewing goals and objectives relevant to the compensation of
the President and Chief Executive Officer and the other
executive officers of the Company and setting their compensation;
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Evaluating the aggregate compensation of all executive officers
in light of the Companys performance;
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Making recommendations to the Board with respect to the
approval, adoption and amendment of cash and equity-based
incentive compensation plans and administering those plans;
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Approving all grants of equity-based awards;
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Reviewing and approving employment agreements with executive
officers; and
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Making recommendations to the Board with respect to the
compensation of directors.
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The Compensation Committee has the authority to retain
independent legal counsel or other advisors, including
compensation consultants. During 2008, the Compensation
Committee engaged an executive compensation expert,
Pearl Meyer & Partners, to advise it regarding a
re-evaluation of our executive compensation program and our
director compensation program. The Compensation Committee
considered Pearl Meyers advice during 2008 in connection
with: (i) the authorization of a new executive compensation
program, including significant severance and retention program
components, as described in more detail below under
Executive Compensation; and (ii) the
authorization of a new director compensation program, as
described in more detail below under Discussion
Surrounding Director Compensation. The President and Chief
Executive Officer is responsible for making compensation
recommendations to the Compensation Committee for each of our
executive officers, other than himself.
Finance
and Investment Committee
The Finance and Investment Committee functioned as a standing
board committee until September 2008. Its function was to review
the capital structure needs of the Company as well as the
Companys investment policies. Currently, the entire Board
performs the functions that were formerly delegated to the
Finance and Investment Committee. The Finance and Investment
Committee, which was composed of Messrs. David (Chairman),
Ratliff, III and Whitehurst, met five (5) times in
2008.
Credit
Risk Committee
The Credit Risk Committee, which was created in 2007 to oversee
the credit risk inherent in the mortgage guaranty insurance
written and managed by Triad, was deemed no longer necessary
following the transition of Triads business to run-off.
The Credit Risk Committee ceased functioning as a standing
committee in September 2008. The Credit Risk Committee, which
was composed of Messrs. Ratliff, III (Chairman),
Swanson, Austin, Williamson and Durham (ex officio, as
Chairman of Audit Committee), met seven (7) times in 2008.
8
Special
Finance Committee
The Special Finance Committee was formed as an ad hoc committee
in early 2008 when it became evident that additional capital
would be needed if the Company was going to continue to write
new business. The Special Finance Committees function was
to oversee the capital raising attempts by the Company in early
2008. The Special Finance Committee ceased functioning when the
decision was made to transition Triads business into
voluntary run-off in July 2008. The Special Finance Committee,
which was composed of Messrs. Ratliff (Chairman),
Whitehurst and Williamson, met ten (10) times in 2008.
Special
Transition Committee
The Special Transition Committee was formed as an ad hoc
committee in mid-2008 as it became apparent that additional
capital might not be raised and the Company needed a plan to
transition into voluntary run-off. The Special Transition
Committees function was to oversee the contingency
planning necessary to take the Company from an operating company
to a run-off company. The Special Transition Committee ceased
functioning in September 2008 with the election of the new Board
of Directors. The Special Transition Committee, which was
composed of Messrs. Ratliff (Chairman), Whitehurst,
Swanson, Austin and Durham, met seven (7) times in 2008.
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the
Companys audited financial statements, internal controls
and the overall quality of the Companys financial
reporting with management and with Ernst & Young LLP
(E&Y), the Companys independent
registered public accounting firm. The Audit Committee has
discussed with E&Y the matters required to be discussed by
Statement of Auditing Standards No. 61 (as adopted by the
Public Company Accounting Oversight Board in Rule 3200T),
which includes, among other items, matters related to the
conduct of the audit of the Companys financial statements.
The Audit Committee has received the written disclosures and the
letter from the independent registered public accounting firm
required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communications with the Audit Committee
concerning independence, and has discussed with the independent
registered public accounting firm that firms independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Companys Board of Directors
that the Companys audited financial statements be included
in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008.
AUDIT COMMITTEE
David W. Whitehurst, Chairman
H. Lee Durham, Jr.
Deane W. Hall
The above report of the Audit Committee does not constitute
soliciting material and should not be deemed to be
filed with the Securities and Exchange Commission or
incorporated by reference into any other filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that the Company specifically
incorporates this report by reference in any of those filings.
9
EXECUTIVE
OFFICERS
Our executive officers are as follows:
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Name
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Position
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Age
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Kenneth W. Jones
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President, Chief Executive Officer, Principal Financial Officer
of the Company and Triad and Director of Triad
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51
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Kenneth S. Dwyer
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Vice President and Chief Accounting Officer of the Company and
Triad
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58
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Shirley A. Gaddy
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Senior Vice President, Operations of Triad
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57
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Stephen J. Haferman
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Senior Vice President, Strategic Initiatives and Director of
Triad
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47
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George L. Jackson
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Vice President, Information Services and Chief Information
Officer of Triad
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42
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Earl F. Wall
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Senior Vice President, Secretary, and General Counsel of the
Company and Triad and Director of Triad
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51
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Kenneth W. Jones has been employed as our President and Chief
Executive Officer since October 2008, and also serves as our
principal financial officer. Prior to his current position,
Mr. Jones served as our Senior Vice President and Chief
Financial Officer from April 2006 to October 2008.
Mr. Jones has over 25 years of experience in the
financial management of companies. Prior to joining Triad, he
was employed by RBC Liberty Insurance Corporation, where he
served as Senior Vice President and Chief Financial Officer from
November 2000 to December 2005. Previously, Mr. Jones was
associated with The Liberty Corporation, where he held a number
of management positions, most recently Vice President,
Controller and Acting Chief Financial Officer. Before joining
The Liberty Corporation, Mr. Jones was employed by
Ernst & Young LLP for 14 years.
Kenneth S. Dwyer has been employed as the Vice President and
Chief Accounting Officer of the Company since September 2003.
Previously, Mr. Dwyer served as Vice President and
Controller of Jefferson Pilot from 1997 to 2003. Prior to that,
he was the Vice President and Controller of Pan American Life
Insurance and was also employed by Deloitte & Touche,
LLP from 1976 to 1996.
Shirley A. Gaddy joined the Company in 1996 and has been Senior
Vice President, Operations since April 2002. Previously,
Ms. Gaddy was employed by Life of the South from 1995 to
1996 as Assistant Vice President. She was with Integon Life
Insurance Corporation from March 1972 to December 1994, most
recently as Assistant Vice President, Manager Credit Insurance.
Ms. Gaddy has been in the insurance/mortgage industry for
over 37 years.
Stephen J. Haferman has been employed as our Senior Vice
President, Strategic Initiatives since July 2008. Previously,
Mr. Haferman served as Vice President, Risk Management and
Information Technology from March 2006 to July 2008.
Mr. Haferman was previously employed by Cheryl and Company
from February 2003 to March 2006, where he served as Senior Vice
President, Chief Operating Officer. From June 2001 to January
2003, Mr. Haferman was employed by American Electric Power
as Vice President, Marketing Information Management. From 1992
to 2001, he worked for Bank One Corporation in a number of
divisions and a variety of senior management positions,
including Senior Vice President, Direct Marketing for Bank One
Retail; Senior Vice President, Technology Program Manager, Bank
One Retail; and Vice President, Risk Department Manager. From
1988 to 1992, he worked for National City Bank where he was Risk
Manager.
George L. Jackson has been Vice President, Information Services
and Chief Information Officer since July 2008. Mr. Jackson
served as our Vice President, Information Services from January
2005 to July 2008 and Assistant Vice President, Technology
Services from January 2000 to December 2004. He joined Triad
Guaranty Insurance Corporation in 1998 as a Project Manager.
Mr. Jackson has 23 years of management experience in
the Information Technology industry. Previously,
Mr. Jackson held IT management positions at Unifi, ISSI,
Roy F. Weston, and Aquidneck Data Corporation (Kodak).
Earl F. Wall has been Senior Vice President of the Company since
November 1999, General Counsel since January 1996, and Secretary
since June 1996. Mr. Wall also served as Vice President of
the Company from 1996 until 1999. From 1982 to 1995,
Mr. Wall was employed by Integon Life Insurance Corporation
in a number of capacities including Vice President, Associate
General Counsel, and Director of Integon Life Insurance
Corporation and Georgia International Life Insurance
Corporation, Vice President and General Counsel of Integon
Mortgage Guaranty Insurance Corporation, and Vice President,
General Counsel, and Director of Marketing One, Inc.
10
EXECUTIVE
COMPENSATION
Significant changes were made in our compensation program for
2008 due to the unprecedented changes affecting our Company, our
industry and the financial markets resulting from the mortgage
crisis that permeated almost the entire economy. On
July 15, 2008, we ceased accepting commitments for any new
mortgage insurance business and began operating in run-off. On
August 5, 2008, we agreed to a Corrective Order with the
Illinois Department of Financial and Professional Regulation,
Division of Insurance (the Division) which, among
other items, includes restrictions on the distribution of funds
by Triad Guaranty Insurance Corporation. This Corrective Order
and our related corrective plan has since been amended
twice in March 2009 and May 2009. In July 2008, Mark
Tonnesen resigned as our President and CEO and was replaced on
an interim basis by the Chairman of the Board, Will Ratliff. In
October 2008, Ken Jones, who was serving as our Senior Vice
President and Chief Financial Officer, was appointed to serve as
CEO and President. Mr. Jones retained the responsibilities
of CFO following his appointment to serve as CEO and President
and Mr. Ratliff continues to serve as the Companys
Chairman of the Board.
In early 2008, the Compensation Committee and the Board approved
significant changes to our executive compensation program. The
purpose of these changes was to retain our executive-level
employees, including our named executive officers, and to
motivate them to continue to achieve our corporate goals and
objectives. The Compensation Committee and the Board determined
that these changes were essential in view of the unprecedented
financial and operational challenges we faced in 2008. In
connection with these changes, the Compensation Committee
awarded no salary increases to our named executive officers,
fixing 2008 base salaries at 2007 levels. In addition, the
Compensation Committee decided not to award cash incentives or
grant equity awards for 2007 performance.
The Compensation Committee and the Board also approved the 2008
Executive Retention Program in early 2008. Under this program,
certain members of senior management were eligible to receive
two cash retention awards if their employment continued through
June 30, 2008 and December 31, 2008, or immediately if
terminated by the Company before those dates. Among our named
executive officers, Mr. Tonnesen was granted a $450,000
retention bonus, Mr. Jones was granted a retention bonus of
$200,000, Mr. Van Fleet was granted a retention bonus of
$180,000, Mr. Wall was granted a retention bonus of
$150,000, and Mr. Haferman was granted a retention bonus of
$100,000. Neither Mr. Ratliff nor Mr. McKenzie were
granted a retention bonus in 2008.
In addition, the Compensation Committee and the Board adopted
the 2008 Executive Severance Program (the Severance
Program) in order to address the pending expiration of
employment agreements with certain executive officers and the
absence of any comprehensive severance pay program. Under the
Severance Program, certain executives, including certain named
executive officers, would be entitled to receive monthly cash
payments based on his or her annual base salary and targeted
cash bonus, as well as COBRA benefits and access to outplacement
services. Although the Severance Plan was originally scheduled
to expire on December 31, 2008, our Compensation Committee,
with the approval of the Division, has extended the Severance
Program until December 31, 2010.
On November 19, 2008, the Compensation Committee approved
the 2009 Executive Compensation Program (the
Program) following the earlier review and approval
of the Program by the Division. The Program is applicable to
employees who are members of the executive committee, including
Messrs. Jones, Wall, and Haferman. The design of the
Program is based on a revised compensation philosophy that
reflects the significant change in the Companys focus from
profit generation to managing a solvent run-off. The four key
principles of the Program are as follows:
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To retain key executives with the talent and the knowledge of
the Company and industry to drive success;
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To motivate, and provide an incentive for, executives to achieve
financial performance and other quantitative and qualitative
targets associated with satisfaction of all legitimate
policyholder claims and ultimate solvency of the Company;
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To reward exceptional performance; and
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To provide a level of financial security to key executives to
allow them to focus on executing the corrective plan in a
difficult corporate environment.
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The material terms of the components of the Program, which are
generally effective January 1, 2009, are described below.
11
Base Salary: Salary adjustments have been
implemented effective January 1, 2009 for selected
executives to recognize their technical expertise, leadership
skills, strategic focus and years of experience and to reflect
the anticipated value of their position at the Company in 2009.
Under the Program, the annual base salary of Mr. Jones
remains at $350,000 for 2009, Mr. Walls 2009 annual
base salary has been increased to $196,000, and
Mr. Hafermans 2009 annual base salary remains at
$198,400.
Annual Performance-Based Cash Incentive
Award: The annual performance-based cash
incentive award component of the Program will recognize the
accomplishment of key corporate goals and individual objectives
and, if those targets are not met, the award will reflect the
missed opportunity. The targeted cash amounts were established
by determining the value of the contributions of the
executives position and are a set dollar amount rather
than a percentage of base salary. Targeted amounts will be
provided when the individual and the Company have met the goals
and objectives approved by the Compensation Committee. In most
cases, the amount of the targeted award is weighted 80% on
corporate performance and 20% on the individuals
performance; however, the Committee has the discretion to award
up to 150% of the targeted amount to those executives who
deliver exceptional results against their individual objectives.
The corporate goals were approved by the Committee in January
2009. Each executive has developed his or her individual
objectives and these were approved by the Chief Executive
Officer in January 2009 and later approved by the Committee. The
individual objectives for Mr. Jones were approved directly
by the Committee. In most cases, a minimum bonus opportunity is
available as a retention guarantee for those
executives in key positions for the ongoing operations of the
Company at December 31, 2009. The minimum annual cash
incentive award for Mr. Jones is $100,000 and his targeted
annual cash incentive award is $200,000. The minimum annual cash
incentive award for Mr. Wall is $62,500 and his targeted
annual cash incentive award is $125,000. The minimum annual cash
incentive award for Mr. Haferman is $50,000 and his
targeted annual cash incentive award is $125,000.
Long-Term Retention Opportunity: In addition
to the minimum annual cash incentive award described above, two
other retention components, a long-term cash award and a
long-term equity award, are available under the Program for
senior executives, with a focus on a much longer retention goal.
Long-Term
Cash Award
The long-term cash awards have a four-year cliff vesting, such
that an executive must remain with the Company until
December 31, 2012 to receive the award. If the executive is
involuntarily terminated prior to December 31, 2012 for
reasons other than cause, including position elimination alone
or in conjunction with a change in control, the cash award will
fully vest upon termination. Under the Program,
Messrs. Jones, Wall and Haferman will have an opportunity
to receive a long-term retention bonus of $350,000, $250,000,
and $100,000, respectively.
Long-Term
Equity Award
The long-term equity awards are intended to supplement the
long-term cash awards and to provide an additional incentive for
a solvent run-off. Equity awards will be in the form of phantom
stock to give the Board flexibility to provide the final award
in either restricted stock or cash. Equity awards will be issued
with a four-year vesting term, with equal vesting in three
annual installments beginning on January 1, 2011. In
accordance with the Companys current and past practice,
these awards will fully vest upon involuntary termination for
reasons other than for cause.
On November 19, 2008, pursuant to the Companys 2006
Long-Term Stock Incentive Plan and the Program, the Committee
approved an award of 35,000 phantom shares to Mr. Jones,
25,000 phantom shares to Mr. Wall, and 10,000 phantom
shares to Mr. Haferman. Each share of phantom stock is the
economic equivalent of one share of the Companys common
stock. The shares of phantom stock become payable, in cash or
the Companys common stock, at the election of the
Committee upon vesting. The award will vest in equal one-third
amounts on January 1, 2011, January 1, 2012 and
January 1, 2013. The award will fully vest upon involuntary
termination for reasons other than for cause.
Severance: As noted above, the Severance
Program has been extended into 2010 without any changes. For
executives, the Severance Program includes annual base salary
and the annual targeted cash award, and would be provided in a
lump sum based on the executives position at the Company
and seniority in the event of a qualifying termination. Under
the Severance Program, Mr. Wall would be entitled to
receive 18 months of severance benefits and
Mr. Haferman would be entitled to receive 13 months of
severance benefits. In the event of a qualifying termination,
Mr. Jones would be
12
entitled to 18 months of severance benefits, in the same
form as provided to other executives under the Severance
Program, pursuant to that certain letter agreement, dated
October 22, 2008, between Mr. Jones and the Company.
Summary
Compensation Table
The following table sets forth certain summary information
regarding the compensation paid or accrued by us to or for the
account of (i) each person who served as our Chief
Executive Officer during 2008, (ii) our two most highly
compensated executive officers who were serving as such at
December 31, 2008 and (iii) two additional persons who
would have been included in this table if those individuals had
been employed by us at December 31, 2008. There were three
individuals who served as Chief Executive Officer during 2008.
Mr. Jones, who currently serves as our Chief Executive
Officer, also serves as our principal financial officer.
Included in the All Other Compensation column of the
Former Executive Officers table are severance
payments that were part of contractual commitments or employment
agreements in place prior to termination of their employment.
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Stock
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Option
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All Other
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Name and
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Salary
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Bonus
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Awards(1)
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Awards(1)
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Compensation
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Total
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Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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Current Named Executive Officers:
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Kenneth W. Jones,
President and Chief Executive Officer
(October 22, 2008 to December 31, 2008),
Senior Vice President and Chief Financial Officer
(January 1, 2008 to October 22, 2008)
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2008
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222,890
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200,000
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(2)
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113,055
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14,969
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6,759
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(10)
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557,673
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2007
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192,500
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71,881
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12,193
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10,070
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286,644
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William T. Ratliff, III,
President and Chief Executive Officer
(July 19, 2008 to October 22, 2008), Executive
Officer
(October 22, 2008 to December 31, 2008)
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2008
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232,178
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123,565
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(7)
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84,376
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(7)
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440,119
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2007
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(8)
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264,818
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112,500
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377,318
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Earl F. Wall,
Senior Vice President, Secretary, and
General Counsel
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2008
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175,000
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150,000
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(2)
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84,297
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12,474
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9,993
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(11)
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431,764
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2007
|
|
|
|
175,000
|
|
|
|
|
|
|
|
96,875
|
|
|
|
10,166
|
|
|
|
9,316
|
|
|
|
291,357
|
|
Stephen J. Haferman,
Senior Vice President, Risk Management and Information Technology
|
|
|
2008
|
|
|
|
198,400
|
|
|
|
100,000
|
(2)
|
|
|
96,496
|
|
|
|
16,076
|
|
|
|
9,054
|
(12)
|
|
|
420,026
|
|
|
|
|
2007
|
|
|
|
198,400
|
|
|
|
|
|
|
|
66,458
|
|
|
|
13,098
|
|
|
|
6,620
|
|
|
|
284,576
|
|
Former Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark K. Tonnesen,
President and Chief Executive Officer
(January 1, 2008 to July 18, 2008)
|
|
|
2008
|
|
|
|
315,245
|
|
|
|
450,000
|
(2)
|
|
|
797,206
|
(3)
|
|
|
982,040
|
(3)
|
|
|
249,662
|
(4)
|
|
|
2,794,153
|
|
|
|
|
2007
|
|
|
|
495,000
|
|
|
|
|
|
|
|
642,617
|
|
|
|
1,008,731
|
|
|
|
35,370
|
|
|
|
2,181,718
|
|
Bruce Van Fleet,
Executive Vice President,
Sales and Marketing
(January 1, 2008 to July 15, 2008)
|
|
|
2008
|
|
|
|
135,417
|
|
|
|
180,000
|
(2)
|
|
|
165,510
|
(3)
|
|
|
377,986
|
(3)
|
|
|
206,581
|
(5)
|
|
|
1,065,494
|
|
|
|
|
2007
|
|
|
|
192,308
|
|
|
|
|
|
|
|
|
|
|
|
105,945
|
|
|
|
10,623
|
|
|
|
308,876
|
|
Gregory J. McKenzie(9),
President and Chief
Executive Officer of Triad
Guaranty Insurance
Corporation Canada
(January 1, 2008 to June 30, 2008)
|
|
|
2008
|
|
|
|
125,022
|
|
|
|
125,022
|
(13)
|
|
|
235,564
|
|
|
|
179,503
|
(3)
|
|
|
761,925
|
(6)
|
|
|
1,427,036
|
|
|
|
|
2007
|
|
|
|
226,202
|
|
|
|
123,383
|
|
|
|
|
|
|
|
69,980
|
|
|
|
67,898
|
|
|
|
487,463
|
|
|
|
|
(1) |
|
Reflects the dollar amount of awards recognized for financial
statement reporting purposes for the year ended
December 31, 2008 in accordance with Financial Accounting
Standards Board Statement No. 123(R)
(FAS 123(R)), disregarding the estimate of
forfeitures related to service-based vesting conditions. During |
13
|
|
|
|
|
2008, there were no actual forfeitures by any of our named
executive officers. Grants were made in 2008 and prior to 2007,
except for the grant to Mr. McKenzie, which was made
pursuant to the terms of his offer of employment in 2007. Grants
in the form of shares of restricted stock were valued at the
market price of our common stock on the date of grant. Grants in
the form of options were ten (10) year stock options
exercisable at the market price on the date of grant. We
utilized a Black-Scholes pricing model (or in certain cases, a
derivative of such a model) and applied a discount for
non-transferability of options and deferred vesting to determine
the number of at the market options. See
Note 11 of the Notes to Consolidated Financial Statements
in our Annual Report on
Form 10-K
for the year ended December 31, 2008. |
|
(2) |
|
Amount reflects retention bonuses granted under terms of the
2008 Executive Retention Program in recognition of the need to
retain these and other individuals through projected periods of
uncertainty resulting from the capital raise process or
regulatory actions if the capital raise was unsuccessful. These
amounts were originally to be paid in July 2008 and January 2009
if the executive officer was still employed by us; however, the
full amounts were paid to each of Mr. Tonnesen and
Mr. Van Fleet in 2008 following their separation from the
Company in accordance with their existing contractual
arrangements with the Company. |
|
(3) |
|
The previously unvested portion of the equity awards held by
Messrs. Tonnesen, Van Fleet and McKenzie became fully
vested as of the date of separation from the Company per the
terms of each of these individuals separate agreements,
except for 40,500 restricted shares issued to Mr. Tonnesen
on February 27, 2008 that will vest in a lump sum on
August 14, 2010. |
|
(4) |
|
This amount includes a lump sum severance payment of $225,000
paid in August 2008 pursuant to his employment agreement in
connection with Mr. Tonnesens retirement from the
Company, a $8,059 matching contribution under our 401(k) plan, a
car allowance of $8,000 ($1,000 per month for the eight months
that he was employed) and reimbursement of financial planning
services of $7,500, as well as payments for long term disability
insurance and country club dues totaling $1,103. |
|
(5) |
|
This amount includes severance payments of $197,083 paid in
monthly installments from July through December 2008 under terms
of the 2008 Executive Retention Program, a $9,200 matching
401(k) plan contribution, and payments for long term disability
insurance of $298. |
|
(6) |
|
This amount includes a lump sum severance payment of $750,130
paid in July 2008 and $11,795 representing a car allowance and
club dues for January through June 2008, grossed up for Canadian
tax reporting purposes in accordance with
Mr. McKenzies original employment agreement executed
in 2007. |
|
(7) |
|
Mr. Ratliff was compensated as a director prior to his
appointment as interim President and Chief Executive Officer
effective July 18, 2008. Mr. Ratliff relinquished his
role of CEO effective October 22, 2008 but remained as an
executive officer through year end and therefore did not qualify
for additional compensation as a director. The additional
compensation earned by Mr. Ratliff as the Chairman of the
Board of Directors included both cash and equity components.
Effective March 10, 2009, Mr. Ratliff relinquished his
role as an executive officer and subsequently will be
compensated only for his service as a director. |
|
(8) |
|
Mr. Ratliffs compensation for the year ended
December 31, 2007 was limited to compensation for service
as a director. |
|
(9) |
|
Amounts have been converted from Canadian Dollars to U.S.
Dollars using the average monthly exchange rate for 2008 of
0.94356. |
|
(10) |
|
Amount includes a $5,644 matching contribution under our 401(k)
plan, $605 for life insurance, and $510 for long-term disability
insurance. |
|
(11) |
|
Amount includes a $9,000 matching contribution under our 401(k)
plan, $483 for life insurance, and $510 for long-term disability
insurance. |
|
(12) |
|
Amount includes a $8,186 matching contribution under our 401(k)
plan, $358 for life insurance, and $510 for long-term disability
insurance. |
|
(13) |
|
Mr. McKenzies 2008 bonus was equal to 50% of his 2008
annual base salary per terms of his original offer of employment
executed in January 2007. |
14
Discussion
Surrounding the Summary Compensation Table
Changes
in the Chief Executive Officer in 2008
The Summary Compensation Table discloses information regarding
the three individuals that held the position of Chief Executive
Officer (CEO) during 2008. Mr. Tonnesen had previously held
that position since joining the Company in 2005. On
April 23, 2008, we entered into an amended and restated
employment agreement with Mr. Tonnesen that replaced his
original agreement. The purpose of the new agreement was to
secure his continued employment during the transition period
until his planned retirement on December 31, 2008, unless
he retired earlier with our consent. Effective July 18,
2008, Mr. Tonnesen resigned his position as CEO and agreed
to retire from the Company on August 15, 2008.
On July 18, 2008, Mr. Ratliff, our existing Chairman
of the Board of Directors, was appointed President and CEO on an
interim basis. Mr. Ratliff received a base salary of
$600,000 on an annualized basis; however, he was not eligible
for any bonus, severance pay or other compensation or to
participate in other benefit plans or arrangements offered by
the Company except for the reimbursement of reasonable expenses.
During the period that Mr. Ratliff served as our employee,
he did not receive Board fees. On October 22, 2008, the
Board of Directors appointed Mr. Jones as President and
CEO. After Mr. Ratliff relinquished his position as
President and CEO, he remained an executive officer of the
Company with an annualized salary of $400,000 with the same
limitations on other benefits described above. Effective
March 10, 2009, Mr. Ratliff relinquished his role as
an executive officer but will continue to serve as the
Companys Chairman of the Board and will be compensated as
a director for such service as set forth under Discussion
Surrounding Director Compensation below. In connection
with his appointment as President and CEO, Mr. Jones
salary was increased to an annualized amount of $350,000 for the
remainder of 2008 and his eligibility to receive a retention
bonus amount of an aggregate of $200,000 remained unchanged.
In connection with his appointment as President and Chief
Executive Officer in October 2008, we entered into a letter
agreement with Mr. Jones dated October 22, 2008 (the
Agreement). Pursuant to the Agreement,
Mr. Jones is entitled to receive an annual base salary of
$350,000 during 2009 and received a pro-rated amount of such
base salary from October 22 to December 31, 2008. The
Agreement did not alter any of the other components of
Mr. Jones 2008 compensation. With respect to calendar
year 2009, the Agreement provides for the opportunity to earn
the targeted cash incentive award, long-term retention cash
incentive award, equity award of phantom shares and severance
payments outlined in the discussion preceding our Summary
Compensation Table.
Current
Named Executive Officers and Changes in Equity
Values
The Summary Compensation Table reflects a significant amount of
expense related to stock and option grants in accordance with
FAS 123(R), which recognizes the amortization of the value
of the equity award recorded at the grant date over the vesting
period. The value at the grant date was calculated as the number
of shares multiplied by the share price as of the date of grant
for restricted stock and the use of the Black-Scholes model to
value options at the grant date. The mortgage industry has
experienced, and it continues to experience, unprecedented
upheaval. This upheaval has caused our financial results and
financial position to decline precipitously over the course of
2007 and 2008. Our management is well aware of the effect that
those results have had on the value of our stockholders
investment in our common stock, having personally experienced
significant erosion in the value of their own equity awards that
we granted to them in recent years. The magnitude of this
decline reflects the extent to which managements interests
are tied to those of our stockholders.
15
The following table (which is not required by the rules of the
Securities and Exchange Commission) sets forth the value, as of
the date of grant, of the shares of restricted stock, shares of
phantom stock, and stock options (computed using the
Black-Scholes model) granted to each of our current named
executive officers during the period
2006-2008
and the dollar amount and percentage decline in the aggregate
value of such grants between the date of grant and
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at Grant Date
|
|
Value at December 31, 2008
|
|
|
|
|
|
|
|
|
Restricted
|
|
Phantom
|
|
Stock
|
|
Restricted
|
|
Phantom
|
|
Stock
|
|
Total Decline in
|
Current Named
|
|
|
|
Stock
|
|
Stock
|
|
Options
|
|
Stock
|
|
Stock
|
|
Options
|
|
Value
|
Executive Officers
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(%)
|
|
Kenneth W. Jones
|
|
|
2008
|
|
|
|
122,600
|
|
|
|
15,750
|
|
|
|
|
|
|
|
7,600
|
|
|
|
13,300
|
|
|
|
|
|
|
|
117,450
|
|
|
|
84.9
|
%
|
|
|
|
2007
|
|
|
|
91,815
|
|
|
|
|
|
|
|
42,100
|
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
133,111
|
|
|
|
99.4
|
%
|
|
|
|
2006
|
|
|
|
136,175
|
|
|
|
|
|
|
|
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
135,225
|
|
|
|
99.3
|
%
|
William T. Ratliff, III
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
112,481
|
|
|
|
|
|
|
|
|
|
|
|
969
|
|
|
|
|
|
|
|
|
|
|
|
111,512
|
|
|
|
99.1
|
%
|
|
|
|
2006
|
|
|
|
283,783
|
|
|
|
|
|
|
|
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
281,443
|
|
|
|
99.2
|
%
|
Earl F. Wall
|
|
|
2008
|
|
|
|
82,755
|
|
|
|
11,250
|
|
|
|
|
|
|
|
5,130
|
|
|
|
9,500
|
|
|
|
|
|
|
|
79,375
|
|
|
|
84.4
|
%
|
|
|
|
2007
|
|
|
|
77,163
|
|
|
|
|
|
|
|
35,084
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
|
111,570
|
|
|
|
99.4
|
%
|
|
|
|
2006
|
|
|
|
96,264
|
|
|
|
|
|
|
|
|
|
|
|
871
|
|
|
|
|
|
|
|
|
|
|
|
95,393
|
|
|
|
99.1
|
%
|
Stephen J. Haferman
|
|
|
2008
|
|
|
|
82,755
|
|
|
|
4,500
|
|
|
|
|
|
|
|
5,130
|
|
|
|
3,800
|
|
|
|
|
|
|
|
78,325
|
|
|
|
89.8
|
%
|
|
|
|
2007
|
|
|
|
98,231
|
|
|
|
|
|
|
|
45,219
|
|
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
142,589
|
|
|
|
99.4
|
%
|
|
|
|
2006
|
|
|
|
114,387
|
|
|
|
|
|
|
|
|
|
|
|
798
|
|
|
|
|
|
|
|
|
|
|
|
113,589
|
|
|
|
99.3
|
%
|
Former
Executive Officers, Contractual Commitments, and Changes in
Equity Value
After Mr. Tonnesen agreed to an amended and restated
employment agreement in April 2008, he retired effective
August 15, 2008. The amended and restated employment
agreement provided for an annual salary of $495,000 until the
anticipated retirement date, a retention bonus of $450,000,
severance in the amount of $225,000, and a grant of
40,500 shares of restricted stock, among other benefits. On
August 15, 2008, in accordance with the terms of
Mr. Tonnesens amended and restated employment
agreement, all of the unvested equity awards, except for the
40,500 restricted shares issued on February 27, 2008 that
will vest in a lump sum on August 14, 2010, vested and he
was paid the remainder of his retention bonus and severance.
Mr. Tonnesen continues to serve as an independent
consultant to the Company under a contract that extends until
August 2010.
As part of our workforce reduction in connection with our
transition to run-off, the Company notified Messrs.
Van Fleet and McKenzie in June of their impending
termination. In accordance with his 2007 employment agreement as
president of Triad Guaranty Insurance Corporation Canada,
Mr. McKenzie was entitled to receive severance in an amount
equal to two times his base salary and target cash incentive
amounting to U.S. $750,130 and the immediate vesting of all
equity awards if he was terminated within 18 months of
service. This cash severance amount was paid in full to
Mr. McKenzie in July 2008. In accordance with the terms of
the Companys 2008 Executive Severance Plan and Executive
Retention Plan, Mr. Van Fleet was entitled to the immediate
payment of the remainder of his unpaid retention bonus, the
immediate vesting of all equity awards and severance payments
equal to thirteen months of his monthly annualized 2008 salary
and 2008 target bonus to be paid over thirteen months following
his termination in July 2008. Additionally, in accordance with
various agreements for each of the individuals regarding their
termination from the Company, the amounts recognized for stock
and option expense in the Summary Compensation Table for
Messrs. Tonnesen, Van Fleet and McKenzie reflected the
recognition of any unrecognized cost as the equity awards became
fully vested upon termination.
16
However, the dramatic decline in the Companys stock price
during 2007 and 2008 has rendered all of the options nearly
worthless. Furthermore, the value at December 31, 2008 of
the restricted stock and phantom stock is also substantially
less than the amounts shown in the Summary Compensation Table
and the expenses recorded in our financial statements. The
following table (which is not required by the rules of the
Securities and Exchange Commission) sets forth the value, as of
the date of grant, of the shares of restricted stock, shares of
phantom stock, and stock options (computed using the
Black-Scholes model) granted to each of the Former Executive
Officers identified in our Summary Compensation Table during the
period
2006-2008
and the dollar amount and percentage decline in the aggregate
value of such grants between the date of grant and
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at Grant Date
|
|
Value at December 31, 2008
|
|
|
|
|
|
|
|
|
Restricted
|
|
Phantom
|
|
Stock
|
|
Restricted
|
|
Phantom
|
|
Stock
|
|
Total Decline in
|
Former Executive
|
|
|
|
Stock
|
|
Stock
|
|
Options
|
|
Stock
|
|
Stock
|
|
Options
|
|
Value
|
Officers
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(%)
|
|
Mark K. Tonnesen
|
|
|
2008
|
|
|
|
248,265
|
|
|
|
|
|
|
|
|
|
|
|
15,390
|
|
|
|
|
|
|
|
|
|
|
|
232,875
|
|
|
|
93.8
|
%
|
|
|
|
2007
|
|
|
|
512,787
|
|
|
|
|
|
|
|
545,745
|
|
|
|
4,495
|
|
|
|
|
|
|
|
|
|
|
|
1,054,037
|
|
|
|
99.6
|
%
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Van Fleet
|
|
|
2008
|
|
|
|
165,510
|
|
|
|
|
|
|
|
|
|
|
|
10,260
|
|
|
|
|
|
|
|
|
|
|
|
155,250
|
|
|
|
93.8
|
%
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
483,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483,936
|
|
|
|
100.0
|
%
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. McKenzie
|
|
|
2008
|
|
|
|
235,564
|
|
|
|
|
|
|
|
|
|
|
|
13,604
|
|
|
|
|
|
|
|
|
|
|
|
221,960
|
|
|
|
94.2
|
%
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
249,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,483
|
|
|
|
100.0
|
%
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
OUTSTANDING
EQUITY AWARDS AT 2008 YEAR END TABLE
The following table sets forth certain information regarding the
outstanding equity awards held by the individuals named in the
Summary Compensation Table at December 31, 2008:
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|
|
|
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Option Awards
|
|
Stock Awards (1)
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|
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|
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Number
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of
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Shares
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Market
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|
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|
|
or Units
|
|
Value of
|
|
|
Number of
|
|
Number of
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|
|
of Stock
|
|
Shares or
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|
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Securities
|
|
Securities
|
|
|
|
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|
That
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|
Units of
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|
Underlying
|
|
Underlying
|
|
Option
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|
Have
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|
Stock That
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|
Unexercised
|
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Unexercised
|
|
Exercise
|
|
Option
|
|
Not
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|
Have Not
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|
|
Options (#)
|
|
Options (#)
|
|
Price
|
|
Expiration
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|
Vested(3)
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|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable(2)
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|
($)
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|
Date
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(#)
|
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($)
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Current Named Executive Officers
|
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|
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|
|
|
|
|
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Kenneth W. Jones
|
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|
1,800
|
|
|
|
900
|
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|
|
43.35
|
|
|
|
03/08/17
|
|
|
|
57,246
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|
|
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21,753
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|
William T. Ratliff, III
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14,825
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|
|
|
|
|
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23.24
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01/25/09
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1,776
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|
|
|
675
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|
|
|
|
20,950
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|
|
|
|
|
|
|
27.95
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|
|
|
01/18/10
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|
|
|
|
|
|
|
|
|
|
|
|
13,750
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|
|
|
|
|
|
|
39.00
|
|
|
|
01/24/11
|
|
|
|
|
|
|
|
|
|
|
|
|
11,760
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|
|
|
|
|
|
|
33.18
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|
|
|
02/06/13
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|
|
|
|
|
|
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|
Stephen J. Haferman
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|
|
1,933
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|
|
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967
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|
|
|
43.35
|
|
|
|
03/08/17
|
|
|
|
25,711
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|
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9,770
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|
Earl F. Wall
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|
|
2,947
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39.49
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01/25/12
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40,451
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|
15,371
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|
|
|
|
1,500
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|
|
|
750
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|
|
43.35
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|
|
|
03/08/17
|
|
|
|
|
|
|
|
|
|
Former Executive Officers
|
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|
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|
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|
|
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|
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|
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Mark K. Tonnesen
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|
108,225
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|
|
|
|
|
|
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41.12
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09/14/15
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|
|
40,500
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15,390
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|
|
|
|
35,000
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|
|
|
|
|
|
|
43.35
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03/08/17
|
|
|
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|
Bruce Van Fleet
|
|
|
|
|
|
|
|
|
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Gregory J. McKenzie
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(1) |
|
Valued based on the closing price of our common stock on
December 31, 2008, which was $0.38. |
|
(2) |
|
All unvested option awards will vest on December 31, 2009. |
17
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|
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(3) |
|
The unvested restricted stock awards will vest as follows:
(i) on January 1, 2009: Mr. Jones,
706 shares, Mr. Ratliff, 1,360 shares,
Mr. Haferman, 755 shares and Mr. Wall,
1,357 shares; (ii) on May 15, 2009:
Mr. Jones, 834 shares and Mr. Haferman,
700 shares; (iii) on May 16, 2009:
Mr. Ratliff, 416 shares; (iv) on January 1,
2010: Mr. Jones, 706 shares, Mr. Haferman,
756 shares and Mr. Wall, 594 shares; (v) on
August 15, 2010: Mr. Tonnesen, 40,500 shares;
(vi) on February 26, 2011: Mr. Jones,
20,000 shares, Mr. Haferman, 13,500 shares and
Mr. Wall, 13,500 shares; (vii) on January 1,
2011: Mr. Jones, 11,666 shares, Mr. Haferman,
3,333 shares and Mr. Wall, 8,333 shares;
(viii) on January 1, 2012: Mr. Jones,
11,667 shares, Mr. Haferman, 3,333 shares and
Mr. Wall, 8,333 shares; and (ix) on
January 1, 2013: Mr. Jones, 11,667 shares,
Mr. Haferman, 3,334 shares and Mr. Wall,
8,334 shares. |
DIRECTOR
COMPENSATION
The following table sets forth certain information regarding
amounts paid or accrued by us to or for the account of our
Directors during the year ended December 31, 2008:
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|
Fees Earned
|
|
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Stock
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|
|
|
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|
or Paid
|
|
|
Awards(2)
|
|
|
Total
|
|
Name(1)
|
|
in Cash ($)
|
|
|
($)
|
|
|
($)
|
|
|
Glenn T. Austin, Jr.(3)
|
|
|
89,915
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|
|
|
37,384
|
|
|
|
127,299
|
|
Robert T. David
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|
|
70,790
|
|
|
|
38,190
|
|
|
|
108,980
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|
H. Lee Durham
|
|
|
110,415
|
|
|
|
34,907
|
|
|
|
145,322
|
|
Richard S. Swanson(4)
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|
|
69,290
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|
|
|
37,384
|
|
|
|
106,674
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|
David W. Whitehurst
|
|
|
108,402
|
(5)
|
|
|
43,281
|
(6)
|
|
|
151,683
|
|
Henry G. Williamson, Jr.(7)
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|
|
69,665
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|
|
|
24,249
|
|
|
|
93,914
|
|
|
|
|
(1) |
|
William T. Ratliff, III, our Chairman of the Board, was not
compensated as a director during his service as interim
President and Chief Executive Officer from July 18, 2008
until October 22, 2008. In addition, because
Mr. Ratliff continued to serve as an executive officer
through December 31, 2008 following his relinquishment of
the positions of President and CEO, he did not qualify for
additional compensation as a director for the period from
October 22, 2008 to December 31, 2008. Effective
March 10, 2009, Mr. Ratliff relinquished his role as
an executive officer and subsequently will be compensated only
for his service as a director. Our Summary Compensation Table
includes Mr. Ratliffs compensation for his service as
our Chairman of the Board and as one of our executive officers
during 2008. |
|
(2) |
|
Reflects the dollar amount recognized for financial statement
reporting purposes for the year ended December 31, 2008 in
accordance with FAS 123(R), disregarding the estimate of
forfeitures related to service-based vesting conditions. During
2008, there were no actual forfeitures by any of our directors.
Grants in the form of shares of restricted stock were valued at
the market price of our common stock on the date of grant. See
Note 11 of the Notes to Consolidated Financial Statements
for the year ended December 31, 2008. The full grant date
fair value of awards granted in November 2008 computed in
accordance with FAS 123(R) for Messrs. David, Durham,
and Whitehurst is $6,750. Mr. Ratliff was not awarded any
stock in November 2008 as he was serving as an executive officer
and employee and did not qualify for director compensation at
the time of the grants. At December 31, 2008, the aggregate
number of unvested shares of restricted stock for each director
was as follows: for Messrs. Austin and Swanson,
241 shares, for Messrs. David and Whitehurst,
15,241 shares and for Mr. Durham, 15,189 shares.
At December 31, 2008, the aggregate number of shares of
common stock which could be acquired through the exercise of
stock options was as follows: Mr. David, 6,880 shares
and Mr. Whitehurst, 20,360 shares. |
|
(3) |
|
Mr. Austin did not stand for re-election at our 2008 annual
meeting, and his term as a director thus ended on
September 11, 2008. |
|
(4) |
|
Mr. Swanson resigned from the Board effective
October 7, 2008. |
|
(5) |
|
Includes $9,237 paid for services as a director of Triad
Guaranty Insurance Corporation Canada. |
|
(6) |
|
Includes $5,090 paid for services as a director of Triad
Guaranty Insurance Corporation Canada. |
|
(7) |
|
Mr. Williamson did not stand for re-election at our 2008
annual meeting, and his term as a director thus ended on
September 11, 2008. |
18
Discussion
Surrounding Director Compensation
Messrs. Austin and Williamson decided not to stand for
re-election to the Board in 2008. On October 7, 2008,
Mr. Swanson resigned as a director based upon additional
responsibilities and time requirements required with his
position with the Federal Home Loan Bank of Des Moines. In
January 2009, Deane W. Hall was elected a director, bringing the
total number of directors to five.
Due to the unprecedented changes that took place in the
financial markets as well as in our own Company during 2008, the
date of our annual stockholders meeting was changed from its
normal May timeframe to September. This delay increased the
period that directors served since the last election from the
normal twelve month period to sixteen months. In an effort to
compensate the directors for this additional period of service,
the Compensation Committee and Board determined to pay an
additional four months of the annual retainer plus amounts for
two additional committees established during 2008 in response to
the many changes that were taking place in the Company. Due to
the significant drop in stock price during the year, the annual
retainer utilized in the additional four month compensation was
structured on an all cash basis rather than the historical 31%
cash and 69% restricted stock component. This amount was paid to
all non-employee directors who served through the September 2008
stockholders meeting and is reflected in the amounts disclosed
in the table above.
In October 2008, the Compensation Committee and the Board
changed the structure of its non-employee director compensation
program in order to reflect both the decline in value of the
trading price of the Companys common stock and the change
in the size of the Board and its committees. General terms of
the revised director compensation program for non-employee
directors, which was effective during the fourth quarter of 2008
and is expected to remain in place at least until the 2009
Annual Meeting of Stockholders, are as follows: Each
non-employee director is entitled to receive an $85,000 annual
cash retainer that is payable in equal quarterly installments.
Each non-employee director shall also receive an annual grant of
15,000 shares of restricted stock pursuant to the
Companys 2006 Long-Term Stock Incentive Plan and the
related restricted stock agreement. The restricted stock vests
100% on the first anniversary of the grant date. Additionally,
those directors that are chosen to serve as committee chairs are
entitled to receive cash compensation paid in equal quarterly
installments of $15,000 for the Audit Committee, $12,500 for the
Compensation Committee and $7,500 for the Corporate Governance
and Nominating Committee. In addition, a single director will be
designated as the Lead Independent Director for which he will
receive cash compensation of $7,500 paid in equal quarterly
installments. For 2009, the Lead Independent Director is
Mr. Durham.
The meeting fee structure was also revised to reflect the
reduced number of committees and the increased time commitment
expected of the directors, as detailed below.
|
|
|
|
|
In-person Board meetings: After attending five
in-person Board meetings in any given year, each non-employee
director is entitled to receive $5,000 for each additional
in-person Board meeting attended for the remainder of that year.
|
|
|
|
Telephonic Board meetings: After attending
eight telephonic Board meetings in any given year, each
non-employee director is entitled to receive for the remainder
of that year: (i) $1,250 for each telephonic meeting
attended that is less than or equal to one hour, and
(ii) $2,500 for each telephonic meeting attended that
exceeds one hour.
|
|
|
|
Telephonic Audit Committee meetings: Each
non-employee member of the Audit Committee is entitled to
receive per year: (i) $1,250 for each telephonic meeting
attended that is less than or equal to one hour, and
(ii) $2,500 for each telephonic meeting attended that
exceeds one hour.
|
|
|
|
Telephonic Committee meetings other than Audit
Committee: Each non-employee member of other
committees is entitled to receive per year: (i) $750 for
each telephonic meeting attended that is less than or equal to
one hour, and (ii) $1,500 for each telephonic meeting
attended that exceeds one hour.
|
At the time of the adoption of the revised director compensation
program in October 2008, the Chairman of the Boards
compensation was intentionally not addressed because he was
serving as an executive officer of the Company, even though he
no longer served as our President and CEO. During the time that
our Chairman served as an executive officer and employee of the
Company, he received no additional Board compensation.
19
On March 10, 2009, the Compensation Committee determined
that our Chairman of the Board had completed his designated
tasks associated with the transition of Mr. Jones as
President and CEO and the management of certain projects for the
Company. Accordingly, effective March 10, 2009,
Mr. Ratliff ceased being an employee and Executive Officer
at the Company and his annual cash compensation was reduced from
$400,000 to $225,000, effective immediately. In connection with
this determination, the Compensation Committee revised our
director compensation program as set forth below with respect to
the Companys Chairman of the Board:
|
|
|
|
|
Retainer: The Chairman of the Board is
entitled to receive a $225,000 annual cash retainer that is
payable in equal quarterly installments. The Chairman shall also
receive an annual grant of 25,000 shares of restricted
stock pursuant to the Plan and the related restricted stock
agreement. The restricted stock vests 100% on the first
anniversary of the grant date.
|
|
|
|
Meetings: The Chairman will not be compensated
for attending Board meetings, Committee meetings or telephonic
meetings.
|
Prior to the adoption of our revised director compensation
program in October 2008, for 2008 our non-employee directors
were each entitled to receive an annual retainer of $95,000,
$30,000 of which would be paid in cash in four quarterly
installments and $65,000 of which would be paid in restricted
stock following the annual meeting of stockholders. Our
non-executive Chairman of the Board was entitled to receive an
annual retainer of $225,000, $112,500 of which would be paid in
cash in four quarterly installments and $112,500 of which would
be paid in restricted stock following the annual meeting of
stockholders. In its discretion and based upon an evaluation
conducted by the Corporate Governance and Nominating Committee,
the Compensation Committee also could recommend a discretionary
payment for services above and beyond those traditionally
performed by a non-executive Chairman of the Board. Since 2007,
grants of restricted stock to our non-employee directors vest
100% on the first anniversary of the grant date, a practice that
was continued when the Board revised our director compensation
program in October 2008.
Prior to October 2008, our Audit Committee members were entitled
to receive $2,500 per meeting, up to an annual maximum of
$20,000. Other committee members were entitled to receive $1,500
per meeting, up to an annual maximum of $6,000. In its
discretion, the Compensation Committee had the authority to
award fees in excess of these amounts based upon additional
services that are required by the applicable committee. Prior to
October 2008, the Audit Committee chairperson was entitled to
receive a retainer of $15,000 per year, while all other
chairpersons of committees were entitled to receive a retainer
of $7,500 per year. The Boards lead independent director
was entitled to receive an annual retainer of $7,500 per year.
As noted above, our October 2008 revised director compensation
program significantly changes the mix of cash and stock that
constitutes our non-employee directors annual retainer.
Under the new program, the split is approximately 92% cash and
8% common stock, while under the old program the split was
approximately 31% cash and 69% common stock. Our Board also
increased the fees paid to the chairs of each committee and
established an entirely new fee structure for in-person and
telephonic meeting attendance under the October 2008 revised
director compensation program.
20
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
The following table contains information regarding securities
authorized for issuance under our equity compensation plans as
of December 31, 2008:
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
(a)
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Securities to be
|
|
|
(b)
|
|
|
Under Equity
|
|
|
|
Issued upon
|
|
|
Weighted Average
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Reflected in Column
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
(a))
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
330,721
|
|
|
$
|
43.35
|
|
|
|
611,512
|
(2)
|
Equity compensation plans not approved by security holders(3)
|
|
|
61,190
|
|
|
$
|
37.95
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
391,911
|
|
|
$
|
38.80
|
|
|
|
611,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This information relates to our 2006 Long-Term Stock Incentive
Plan, which was approved by our stockholders in May 2006. |
|
(2) |
|
In addition to being available for future issuance upon exercise
of stock options, shares that remain available for future grant
may be issued pursuant to restricted stock awards under our 2006
Long-Term Stock Incentive Plan. |
|
(3) |
|
This information relates to our 1993 Long-Term Stock Incentive
Plan. |
|
(4) |
|
All shares that were available for issuance under our 1993
Long-Term Stock Incentive Plan at the time the 2006 Long-Term
Incentive Plan was adopted were carried forward to the 2006 plan
and became available for issuance under that plan. See
Note 12 to the Companys Consolidated Financial
Statements. |
CERTAIN
TRANSACTIONS
Other than with respect to the conflicts of interest policies
contained in our Code of Ethics and Code of Conduct, which
require that all of our directors, officers and employees
disclose their personal or business interests in any transaction
in which we may engage and recuse themselves from any discussion
or decision affecting their personal or business interests, we
do not maintain a formal written related person transaction
policy. In addition to communicating with us as required by our
Code of Ethics and Code of Conduct, however, each of our
executive officers and directors or their immediate family
members (each, a related person), completes an
annual questionnaire that elicits information about ongoing and
potential transactions, arrangements or relationships, other
than certain specified employment and compensatory matters
(each, a transaction), in which we and any related
person are participants (a related person
transaction) in order to determine whether (i) such
related persons have or may have a direct or indirect material
interest in the transaction, (ii) the amount involved
exceeds $120,000 (which for 2007 and 2008 was less than 1% of
the average of the Companys total assets at year end for
the last two completed fiscal years), and (iii) any such
transaction is or would be in the best interest of us and our
stockholders. The appropriate committee of the Board, depending
on the nature of the transaction, reviews and approves or
ratifies all related person transactions, which are publicly
disclosed if and as required by SEC rules. There were no related
person transactions during 2008 and 2007 that were required to
be disclosed pursuant to our policies or SEC rules. The
appropriate committee of the Board is required to consider all
available relevant facts and circumstances in its review of an
ongoing or potential related person transaction, including the
benefits to us, the impact on a directors independence in
the event the related person is a director (or a family member
or entity affiliated with a director), the availability of other
sources for comparable products or services, the proposed terms
and the terms available to or from parties that are not related
persons. Any director who is a related person with respect to a
transaction under
21
review may not participate in the deliberations or vote with
respect to approval or ratification of the related person
transaction. The Company paid companies affiliated with our
Chairman for expenses incurred on behalf of Triad. The total
expense incurred for such items was $34,500 and $69,300 in 2008
and 2007, respectively.
The Board does not believe that a specific written related
person transaction policy is necessary because the Board
historically has not, and does not expect to, approve related
person transactions that require disclosure under SEC rules
other than in rare circumstances. Each related person
transaction is considered on a stand-alone basis based on facts
and circumstances at the time of consideration. In addition to
the conflicts of interest procedures set forth in our Code of
Conduct and Code of Ethics and the information elicited through
our annual questionnaire, the appropriate committees
procedures with respect to review and approval of related person
transactions are dictated by principles of Delaware corporate
law as in effect at the time and the discharge of our
directors fiduciary duties to us and our stockholders.
PROPOSAL TO
RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee of the Board has appointed Ernst &
Young LLP to be the Companys independent registered public
accounting firm for the year ending December 31, 2009.
The Board asks the stockholders to ratify the appointment of
Ernst & Young LLP. If the stockholders do not ratify
the appointment, the Audit Committee will consider whether it
should appoint another independent registered public accounting
firm.
Representatives of Ernst & Young LLP are expected to
be present, and to be available to respond to appropriate
questions, at the annual meeting. They will be provided the
opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE YEAR ENDING DECEMBER 31, 2009.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEE INFORMATION
Our consolidated financial statements for the year ended
December 31, 2008 were audited by Ernst & Young
LLP (E&Y), our independent registered public
accounting firm for that calendar year. Set forth below are the
aggregate fees that the Company paid or accrued for the audit
and other services provided by E&Y to the Company for each
of the years ended December 31, 2008 and 2007.
Audit
Fees
The aggregate fees, including expenses reimbursed, billed by
E&Y for professional services rendered for the audit of our
consolidated financial statements, the reviews of our quarterly
financial statements and the audits of our individual operating
subsidiaries, including our Canadian subsidiary in 2007, that
are required for regulatory purposes were $605,000 for calendar
year 2008 and $709,177 for calendar year 2007. Aggregate fees in
2007 included fees for services rendered for an integrated audit
and for an audit of internal control over financial reporting.
Audit-Related
Fees
The aggregate fees, including expenses reimbursed, billed by
E&Y for assurance and related services reasonably related
to the performance of the audit and review of our financial
statements, and not reported in Audit Fees above,
were $22,000 for calendar year 2008 and $50,545 in calendar year
2007. These services included an actuarial certification for our
Vermont captive reinsurance subsidiary and an audit of our
401(k) plan for each of 2008 and 2007.
Tax
Fees
We did not engage E&Y for tax services in calendar years
2008 and 2007.
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All Other
Fees
The aggregate fees, including expenses reimbursed, billed by
E&Y for services rendered to us, other than the services
described above, were $1,950 in calendar year 2008 and $1,500 in
calendar year 2007. These fees were for a subscription to
E&Ys online accounting and reporting database.
The Audit Committee pre-approves all auditing services and
permitted non-audit services, including the fees and terms
thereof, to be performed for us by its independent auditor,
subject to the de minimus exceptions for non-audit services
as provided for in the Sarbanes-Oxley Act and the rules and
regulations of the Securities and Exchange Commission. The Audit
Committee may form and delegate authority to subcommittees,
consisting of one or more members, to grant pre-approvals of
permitted non-audit services, provided that decisions of such
subcommittees to grant pre-approvals are presented to the full
Audit Committee at its next scheduled meeting. In calendar year
2008, all non-audit services were approved by the Audit
Committee.
COMMUNICATIONS
WITH DIRECTORS
The Board of Directors of the Company believes that it is
important for stockholders to have a means of communicating with
the Board. Accordingly, stockholders desiring to send a
communication to the Board of Directors, or to a specific
director, may do so by delivering a letter to the Secretary of
the Company at Triad Guaranty Inc.,
101 South Stratford Road, Winston-Salem, North
Carolina 27104. The mailing envelope must contain a clear
notation indicating that the enclosed letter is a
stockholder-board communication or
stockholder-director
communication, as applicable. All such letters must
identify the author as a stockholder and clearly state whether
the intended recipients of the letter are all members of the
Board of Directors or certain specified individual directors.
The Secretary will open such communications and make copies, and
then circulate them to the appropriate director or directors.
We strongly encourage all directors to attend the annual
meetings of stockholders. All of our then-current directors were
in attendance at the 2008 Annual Meeting of Stockholders.
CODE OF
ETHICS
The Board of Directors has adopted a Code of Ethics for our
principal executive and senior financial officers, which is
available at our website at:
http://www.triadguaranty.com/investors/corporate_governance.php.
This Code supplements our Code of Conduct applicable to all
employees and directors and is intended to promote honest and
ethical conduct, full and accurate reporting and compliance with
laws as well as other matters.
To the extent permissible under applicable law, the rules of the
SEC or NASDAQ listing standards, we also intend to post on our
website any amendment to the Code of Ethics that requires
disclosure under applicable law, SEC rules or NASDAQ listing
standards. Any waiver of the Code of Ethics for any executive
officer or director must be approved by the Board and will be
disclosed on a
Form 8-K
filed with the SEC, along with the reasons for the waiver.
STOCKHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING OF STOCKHOLDERS
The Company currently intends to hold its 2010 Annual Meeting
of Stockholders on May 20, 2010, rather than in August or
September as it has done for the past two years. As such, the
Rule 14a-8
stockholder proposal and floor proposal deadlines set forth
below have been calculated based on the projected mailing date
of April 19, 2010 for the 2010 proxy materials. The
director nomination deadlines set forth under General
Nomination Right of All Stockholders have been calculated
based on the proposed date of the 2010 Annual Meeting of
Stockholders, which as noted above is expected to be
May 20, 2010.
Stockholders intending to present a proposal for consideration
at the next annual meeting of stockholders may do so by
following the procedures prescribed in
Rule 14a-8
under the Securities Exchange Act of 1934 and our Certificate of
Incorporation. To be eligible for inclusion in the
Companys proxy statement, stockholder proposals must be
received by the Company no later than December 20, 2009.
Notice to the Company of a stockholder proposal, other than
director nominations, submitted otherwise than pursuant to
Rule 14a-8
will be considered untimely if received by the Company after
March 5, 2010, and the proxies named in the accompanying
form of proxy may exercise discretionary voting power
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with respect to any such proposal as to which the Company does
not receive a timely notice. See General Nomination Right of
All Stockholders above for information regarding submission
of director nominations.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
Some banks, brokers or other nominee record holders may
participate in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy statement or annual report may have been sent to
multiple stockholders living in the same household. We will
promptly deliver a separate copy of either document to any
stockholder upon request submitted in writing to us at Triad
Guaranty Inc., 101 South Stratford Road, Winston-Salem, North
Carolina 27104, Attention: Secretary or by calling
(800) 451-4872.
Any stockholder who wants to receive separate copies of the
annual report and proxy statement in the future, or who is
currently receiving multiple copies and would like to receive
only one copy for his or her household, should contact his or
her bank, broker or other nominee record holder, or contact us
at the above address and telephone number.
OTHER
MATTERS
We are not aware of any matters, other than those referred to
herein, which will be presented at the meeting. If any other
appropriate business should properly be presented at the
meeting, the proxies named in the accompanying form of proxy
will vote the proxies in accordance with their best judgment.
EXPENSES
OF SOLICITATION
All expenses incident to the solicitation of proxies by the
Company will be paid by the Company. In addition to solicitation
by mail, arrangements have been made with brokerage houses and
other custodians, nominees, and fiduciaries to send the proxy
materials to their principals, and the Company will reimburse
them for their reasonable out-of-pocket expenses in doing so.
Proxies may also be solicited personally or by telephone or
email by employees of the Company.
FINANCIAL
INFORMATION
Our annual report for the year ended December 31, 2008
is enclosed. Upon written request, we will provide without
charge to any stockholder of record or beneficial owner of our
common stock a separate copy of our Annual Report on
Form 10-K
for the year ended December 31, 2008 (without exhibits),
including financial statements, filed with the SEC. Any such
request should be directed to Bob Ogburn, our Vice President and
Treasurer, at 101 South Stratford Road, Winston-Salem, North
Carolina 27104. We will furnish any exhibit to our Annual Report
on
Form 10-K
upon receipt of payment for our reasonable expenses in
furnishing such exhibit.
Winston-Salem, North Carolina
July 24, 2009
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Using a black ink pen, mark your
votes with an X as shown
in this example. Please do not
write outside the designated areas.
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote
your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies
submitted by the Internet or telephone must be received by
12:00 a.m., Eastern Daylight Time, on August 27, 2009.
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Vote by Internet
Log on to the Internet and go to
www.investorvote.com/tgic
Follow the steps outlined on the secured website. |
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Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the United States,
Canada & Puerto Rico any time on a
touch tone telephone. There is NO CHARGE to you for the call.
Follow the instructions provided by the recorded message. |
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Annual Meeting Proxy Card |
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C0123456789 |
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6 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6
A Proposals
The Board of Directors recommends a vote FOR the listed nominees and FOR Proposal 2.
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To elect the five (5) directors named herein to serve until the next
annual meeting of stockholders and until their successors are elected
and qualified or until their earlier resignation or removal. |
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01 - Robert T. David
04 - William T. Ratliff, III |
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02 - H. Lee Durham, Jr.
05 - David W. Whitehurst |
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03 - Deane W. Hall
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Mark here to vote FOR all nominees* |
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*For all listed
nominees or a substitute therefor if any nominee is unable, or for good cause,
refuses to serve. |
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Mark here to WITHHOLD vote from all nominees |
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For All EXCEPT - To withhold a vote for one or more nominees, mark
the box to the left and the corresponding numbered box(es) to the right.
Your shares will be voted for the remaining nominees. |
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To ratify the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm
for the year ending December 31, 2009. |
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This proxy is solicited on behalf of the Board of Directors.
This proxy, when properly executed, will be voted in the manner directed herein by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
Proposal 1 and FOR Proposal 2. This proxy is revocable at any time before it is voted. |
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In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting. |
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Non-Voting Items |
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Change of Address Please print new address below. |
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C Authorized Signatures This section
must be completed for your vote to be counted. Date and Sign Below
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders
must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate
officer, please provide your FULL title.
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Date (mm/dd/yyyy) Please print date below. |
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Signature 1 Please keep signature within the box. |
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Signature 2 Please keep signature within the box. |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN
THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
Proxy Triad Guaranty Inc.
101 South Stratford Road
Winston-Salem, North Carolina 27104
Proxy
Solicited by Board of Directors for Annual Meeting August 27, 2009
Dear Stockholder,
Your vote is important to us, and we encourage you to exercise your right to vote your shares of
common stock. On behalf of the Board of Directors, we urge you to sign, date and return the proxy
card in the enclosed postage-paid envelope as soon as possible. You may also vote by Internet or
telephone using the instructions on the reverse side.
We appreciate your confidence in us and your cooperation with this
solicitation.
Sincerely,
Triad Guaranty Inc.
The holder(s) signing on the reverse side hereby appoint(s) William T. Ratliff, III and David W.
Whitehurst, or either of them, as attorneys in fact and proxies, each with the power to appoint a
substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse
side, all the shares of common stock of Triad Guaranty Inc. held of record by such holder(s) on
July 10, 2009, at the Annual Meeting of Stockholders to be held at the offices of Triad Guaranty
Inc., 101 South Stratford Road, Winston-Salem, North Carolina on Thursday, August 27, 2009 at 2:00
p.m., Eastern Daylight Time, or any adjournment or postponement thereof. The undersigned hereby
ratifies and confirms all that said attorneys in fact and proxies, or either of them or their
substitutes, may lawfully do or cause to be done by virtue hereof, and acknowledges receipt of the
Notice of Annual Meeting of Stockholders, the accompanying proxy statement and the 2008 Annual
Report to Stockholders on Form 10-K.